Satellite tax fears cloud Sky

BROADCASTER BSkyB released a solid set of results on Friday, yet the shares have since shed nearly 10% of their value. On Monday, they fell 32p to 682p, following reports the Government could be planning to tax the company for the use of its broadcast spectrum.

Analysts were less hysterical about the reports. Most believe the potential for outrage among Sky's 6m users - who will pay higher subscription fees if the tax is levied - will keep the Government from acting. Not to mention the fact that more than a dozen European satellite broadcasters reach into UK airspace. The Government would have to find a way to place some sort of levy on the foreigners as well, which is unlikely to go down well in Brussels.

More troubling is the fear that struggling French media group Vivendi may be planning to unload 200m Sky shares. Vivendi is prohibited from selling the 11% stake until late October. But that lock-in agreement becomes invalid if Vivendi debt is downgraded to junk status. Both Moody's and Standard & Poor's rate its short-term debt at the lowest investment grade. BT unloaded a large block of Sky last week.

Sky untangled itself from failed German broadcaster Kirch on Monday, exercising its option to sell its Kirch shares. Sky said it was unlikely to receive much for the stake.

The clouds surrounding the company did not cast too much gloom over the broader market. A roaring open to US trading stirred UK shares from a quiet start. The FTSE 100 finished 33.6 points higher at 5204.8. The Dow Jones ended up 1.7%.

The London Stock Exchange itself was one of the hottest stocks of the day, jumping 25 3/4p to 488 3/4p. The speculative buying forced it to issue a statement, admitting to 'discussions with other parties'.

Tech shares continued to struggle, despite the strength of the Nasdaq. Computer services firm CMG was one of the worst hit in the wake of the profit warning from rival Logica (up 2p to 245p) late last week. Chairman Cor Stutterheim said he has 'not seen real, true signals of an upsurge in demand for later in the year'. He repeated warnings that sales are likely to be flat in the first half. The shares slipped 10 3/4p to 137 1/2p, their lowest in five years. Broker UBS Warburg cut its recommendation to 'hold' and dropped its price target to 165p from 280p.

Network equipment vendor Azlan was also in trouble after admitting current trading has not improved from last year's depressed levels. But annual profits rose 14% to £18m on improved turnover of £610m. The shares shed 9p to 143 1/2p.

Marconi took another drubbing ahead of Thursday's annual results, falling 2.17p to 8.83p. The expectation of a large loss is less troubling than fears it may not report progress on debt-restructuring. Expectations of a comprehensive plan were dashed by weekend reports of a rift between Marconi's management and its bankers.

Among the wreckage of the tech shares were a few treasures. Computer game maker Eidos was in demand after the chairman of French rival game maker Ubi Soft told a newspaper that Eidos 'could be a target'. Analysts believe the two make a good fit, even if Eidos - capitalised at just under £200m - is a big bite for Ubi Soft. Analysts believe any French bid will come before 15 November, the launch date for Eidos' next Lara Croft game. The shares gained 2 1/4p on Monday to 143 1/4p.

Computer services firm Xansa gained 12p to 152p as investors put a great deal of faith in an upgrade from the house broker. UBS Warburg reckons the shares are a 'strong buy', but cut its target price to 210p from 350p.

Elsewhere, dealers believe talk of a near-term bid for troubled Mothercare has some validity. The shares rose 3 1/2p to 245p.